When to use a Building and Pest Inspector

Whether to engage a building inspector or not provides many buyers with a quandary, but they can potentially save you tens of thousands.

Looks can be deceptive, there’s no doubt about that, and for some people that deception can end up costing a lot of money.

When it comes to viewing a property, there’s only so much we ‘lay people’ can deduce about, say, how structurally sound it is or what critters might have taken up residence in the woodwork.

Which is where the building inspector comes in – but exactly what are they made of?

Building consultant and architect Jerry Tyrell has been on building sites since his late teens.

“I just got involved in all areas of the forensic side,” he explains. “I was interested in better quality building and better quality practices and then I had friends ask me to look at their buildings and I realised there was no science to it. So I started to develop a taxonomy for building defects, which sounds terribly boring but it floated my boat!

“I quite like the idea of there being a science… a strong methodology for the inspection of buildings.”

Tyrell describes inspecting buildings as “profiling exercise”.

“We profile a building like we profile a person,” he says. “We look at the suburb, at the topography, the age of the building, the type of construction, the caliber of the work that’s in front of us, and then try and drill down on a very complex check sheet to identify the statistics.”

He’s keen to point out that a good building inspector tries not to overdramatise or call out things that don’t matter.

“We try and identify the things that are going to affect use, value or resale; they’re our basic benchmarks.” A common complaint about building and pest reports is their size.
Buyers’ agent Patrick Bright points out that many reports he comes across “read like a thriller novel, even where there’s nothing wrong… they’re full of disclaimers.”

Tyrell agrees. “It doesn’t need to be three pages of meaningless disclaimers and a lot of descriptive waffle,” he says. “It has timber windows.’ ‘It has a driveway.’ ‘It’s two storeys.’ They’re just irrelevant. Many reports contain that level of trivial content that in fact makes people feel comfortable but doesn’t inform them.”

One way to counter the issue, Tyrell believes, is for inspectors to also offer helpful advice.

“While some inspectors, he says, will simply describe an issue, a better one will go further.

We increasingly go to remedy-based comment. If we can, we’ll say ‘this is what you need to do’ if we think it’s something people need to note.

We might just say ‘water damage at aged kitchen bench joint… but it’s 30 years old.’ We don’t recommend replacing it because that would be irresponsible… it’s unfair on the seller.”

Important Purchase

Professional engineer Paul Antonelli started Resicert Property Inspections more than five years ago.

His background in property and engineering ensured it was a good fit, he says.

“It enabled me to be engaged in my local area working with other real estate professionals helping people with one of their most important purchases – property.”

Antonelli believes inspections are invaluable to buyers for many reasons.

“When purchasing an existing property,” he says, “it’s important to understand that you’re buying the property in an as-is condition.
In essence, it’s no different to a second-hand car purchase.
You’d expect that, for a second-hand vehicle, the condition of the tyres, seating, paintwork, etc., may not be to the same standard as a new car.
It’s the same for an existing property. Often buyers don’t understand this and have unrealistic expectations of what the vendor is required to fix and upgrade as part of the sale process.”

Without a thorough inspection, he says, it isn’t possible for the buyer to fully understand the condition of the property, whether there are any defects or structural issues, and what maintenance items you should be aware of that may need attention.

“While these may not be issues that the vendor necessarily has to rectify, it’s till important that you’re aware of the full range of information relating to the property.”

And, of course, sometimes that knowledge can know thousands off a property price.

Property Searcher Buyers’ agent Scott McGeever recalls a scenario in which a client came out smiling.

“A recent property bought by one of our buyers’ agents for a client was a four-bedroom character home.
The building and pest report uncovered lots of small maintenance issues, so we asked for $17,000 off the asking price ad managed to get $11,000 off,” he says.

Director of Best West Building Mark Lewer has seen a number of cases of clients saving substantial sums, including one that informed him she’d managed to get the price of  a house reduced by $12,500 because of defects in the garage uncovered during an inspection.

“At another property,” he says, “there was significant subsidence on the house and when I went to enter the roof space I found a load of broken asbestos where the old roof sheets had been replaced but asbestos debris hadn’t been cleared.
A quote for all the remedial work including structural repair came to $80,000.
The property value was only in the $600,000 range, so this was a huge amount and the owner wasn’t prepared to discount or have the work carried out.

“It was more trouble than my FIFO buyer wanted and with the use of his due diligence clause he was able to withdraw.”

That clause is another key element in the house inspection process, according to Lewer.

“It’s a big deal, it really is. Buyers should have a clause such that they can have a building inspection to their satisfaction or write in a 12-day due diligence clause, where you have 12 days to carry out due diligence at the property.

“If it doesn’t reach your satisfaction, you can give them a notice to terminate. That’s the way I always deal with it, on my own building inspections.”

Buyers’ Agent View

EPS Property Search buyers’ agent Patrick Bright is clear on how important he thinks the role of building inspector is:
“I think people who buy properties without doing building and pest inspections have got rocks in their head,” he says, bluntly.
“If you’re going to have a pest problem, it’s not going to be a small thing,” he explains, “it’s going to be a five-figure problem.
You’re going to be looking at at least $10,000-plus generally, and I’ve seen stuff, if it’s structural, run into the hundreds of thousands.”

Bright also points out that it’s not a problem exclusive to older properties.

“I once had a building inspector put on the front of the report (he was a bit of a comedian) ‘Not sure what’s holding the roof up’!
The house had serious termite issues and it was about a six-year-old home. They can get in there and get stuck into it pretty quickly!”

For buyers’ agent, the report can be a crucial negotiating tool.

“Probably one in three properties has an issue, or has a minor issue, but one in 10 are significant enough that you need to negotiate a bit of money off,” Bright says. “It’s mainly termite issues, structural sort of stuff. You get a builder in to have a look at it and ask ‘how much is this going to cost?’”

For Bright, if the specifics aren’t forthcoming at this point, he believes it’s best to just walk away. An exact(ish) figure, however, can be used to negotiate with a seller.

“Generally I’d just say to the vendor’s agent, ‘Either you’ve got to fix it or we have… and this is the quote we’ve got. Our offer would’ve been this, if we had a clean building report, but we don’t have a clean one so we’re reducing our offer to this.”

To Inspect Or Not?

As professionals in the business, it’s perhaps not surprising to hear that all three of our inspector believe inspections before buying a property are a no-brainer.

And their reasons make for a convincing argument.

“People walk through on a Saturday morning and it’s got a fresh lick of paint or there are fresh flowers out on the tables and they think ‘Ooh, yes, this is lovely,” Lewer says. “They don’t look at the roof frame, they don’t look at the rood exterior.

“They have no idea about the damp wall behind the shower, the sagging ceiling they hadn’t noticed… the list is potentially endless.”

Tyrell explains just how much you’re getting for your money when you book in that inspection.

“Even though we’re quite well qualified, we’ll crawl the roof interior, we’ll crawl the subfloor, we’ll get up on available roofs, we’ll get up on ladders. The subfloor is a treasure trove of things once you’ve seen inside.

“We like to do our job thoroughly. It’s like when you meet a person, you’ll make a judgment call on that person, probably your instinct will call it immediately, and then you’ll reason through it, but it may take you hours, days, years to really understand that person.”

Antonelli concurs.

“Due to buyers’ emotional involvement in the purchase, minimal time to view the property and inability to fully access all components of the property, it just makes sense to get comprehensive inspections undertaken.

It’s the areas that you can’t see that are essential to get inspected. An example of an issue in the internal rood space that could otherwise be missed is air conditioning ductwork that’s opened up or separated.

That would have an ongoing impact on the performance of the air conditioning united undetected.”

Horror Stories

When it comes to worst-case scenarios, our inspectors have seen some sights.

“We’ve seen the best, we’ve seen the worst,” Tyrell says. “I’ve seen end terraced where the end wall leans, I’ve seen Victoria buildings with turrets and complex joinery that’s exquisitely made but hasn’t been maintained for 85 to 90 years so everything’s rusting and damaged.

“I’ve seen drainage cut out from underneath, so all the pipes went through the floor. I went into a cobweb-infested subfloor and there was no drainage underneath the bathrooms and kitchen, it’d been cut out. Water just went into the subfloor!

“Probably the number one thing in the last 15 years has been leaking balconies because of the inability of the government and the industry bodies to identify best practice to get your window thresholds to drain and your balconies not to leak.”

For Antonelli, the cracks were clearly showing.

“There was a brick home on concrete foundations that had some telling cracks in the external walls. That’s not always an indication of an issue but in this case there was some evidence that work was required to stabilize the ground under the slab.” Said work was going to be an expensive exercise, which enabled the purchaser to renegotiate the contract.

“Sometimes homeowners are keen to save some money and have a go at doing their own electrical work,” he goes on. “Not only is it illegal but is can result in dangerous situations. In one particular home there was extensive replacement of wiring within the roof space that needed replacing by a qualified electrician.

The work was undertaken and the sale proceeded but this saved the buyer considerable issues down the track.”

Lewer, too, has seen his fair share of oddities – from houses that have been converted into drug lags to dodgy goings-on up high.

“Insulation in the roof space – normal you say? It was still in the original packing bags, tucked neatly in one corner, years later.

Then there was the timber deck that had actually been built on the metal roof – no railings, great view!”

Of course, problems aren’t always seller cover-ups, Antonelli points out.

They might have purchased the property without a building inspection themselves and inherited the problem.

And there are plenty of problems to be found when it comes to housing.

Inspections to the Rescue

Astute Buyers’ Advocates’ David Melatti has helped several clients by encouraging them to engage building and pest inspectors.

“Melissa’s a single professional with a growing portfolio of investment properties,” he explains.

“We secured a wonderful looking Californian bungalow in Ballarat, but looks can be deceiving!

“The selling agent was adamant we didn’t need a building inspection.

“The report showed it needed a new roof, including rafters and beams, and had termite activity under the home.

“Costs to repair were almost 10 per cent of the value of the home. Melissa cooled off and we purchased a better home a couple of blocks down for $10,000 less, and in fantastic condition.

“Then there were Rebecca and Dan. When they came across a home they though needed a little work, we were called in to negotiate.
Luckily we were, as they weren’t going to get a building and pest inspection, and when I recommended one, plus a pool inspection, the reports showed there was considerable rising damp, primarily because there was a foot of water under the whole home.”

“Also, the pool had considerable leakage, so that needed to be completely emptied, resealed and retiled, and the house had considerable roof leaks, which had damaged ceilings and plasterwork.
Rebecca and Dan were so disappointed to find out the agent had told them the property was in good order, when in fact it needed to be demolished.
It later sold for $250,000 over reserve to an unsuspecting homeowner who didn’t get a building inspection.”

The questionable ethics involved in the latter sale is something many in the industry feel strongly about, as well as the lack of a national regulatory body.

Tyrell says: “I think the lack of a consistent professional body across Australia, with clear guidelines – like the engineering fraternity and the accounting fraternity, where you’ve got clear regimes and disciplines – I think it’s a major problem.”

It’s a hot topic for Lewer, too. “There’s an Australian standard for Building Inspections, AS4349. The requirement in the standard is that the inspection is carried out by a ‘competent person.’

“Clearly this is very much open to interpretation and there are many inferior inspection services being carried out by inexperience, unqualified inspectors.
I always recommend that consumers ensure their inspections are carried out by a registered builder, who has satisfied the Building Commission of his/her overall building experience.

“That doesn’t guarantee a good services, however. Unfortunately even some of the so-called qualified inspectors are less than satisfactory.

“Plus, even a good pre-purchase building inspection report is constrained by the wording of the building inspection clause in the Contract of Sale, which is very significant for the buyer and seller.”

It does seem as though a body overseeing the practice of house inspections would make good sense. After all, as Antonelli reminds us, the reports themselves don’t necessarily put buyers off, so thorough reporting isn’t something to be wary of.

“In our experience, buyers aren’t put off a sale necessarily by the issue, but more wonder how it has been managed and communicated. Sometimes they become suspicious- ‘What else could be there?’

“Most buyers are realistic and understand that an older property won’t be perfect and has been priced accordingly, so the more information on it, the quicker a buyer can get comfortable with the property and exactly what they’re buying.”

Contracts are Key

When it comes to the law, ethics aside, it’s generally a case of caveat emptor (buyer beware).

Contracts are key and, with this in mind, Paul Antonelli points out some things to remember.

• Ensure you understand your contract and, if required, get professional assistance or input.
• Always include a building and timber pest inspection clause whenever you purchase an existing property.
• Make sure that the clause included in the contract provides you with enough time to organize the inspections and be able to review the reports – the minimum period recommend is seven days.
• Ensure the clause itself is appropriate and entitles you to specific actions, depending on the outcomes of the inspections.
  For example, if a structural defect is found in the property you have the right to request the seller to rectify, choose not to proceed, or be compensated accordingly.
• It’s essential that it’s carried out in accordance with the relevant Australia Standard AS43491.

Get reports done – money well spent for peace of mind

There’s been some talk in the industry about the subject of agents recommending building and pest inspectors, where the reports haven’t been done professionally and as a result defects and building issues have been missed.

Evidently it’s been happening quite a bit in capital cities and regional areas, where certain inspection companies are referred by real estate agents, because the agents know that these companies will do a quick report without discovering too much wrong with the property.

It can’t be stressed enough that it’s imperative that these reports are done by professionals with a proven track record.

If not, you’re just throwing money down the drain. And it’s your legal right to have a professional building and pest inspection done on the property you’re intending to purchase.

This helps your buyers’ agent too, because they’re then able to leverage off this and use it as a negotiating tool to reduce the price of the property.

It ensures that you won’t be forking out thousands of dollars in correcting building defects you discover months after you move in!

Some time ago, a client of mine was about to purchase a three-bedroom apartment in a relatively new complex in Darwin’s CBD.

I suggested we get some reports done, but because the developer owned the units, my client felt that getting a swag of reports done was a bit of overkill and not really warranted.

Not long after her purchase, she discovered to her absolute horror that the electrical and water services in the unit…wait for it…weren’t connected up!

Needless to say, a fair amount of cost was involved in getting that issue rectified.

Another client of mine was about to purchase a house in Rapid Creek, a lovely seaside area in Darwin’s northern suburbs.

It was an old house, tenanted, and the owner of the property lived interstate. Again, the client declined inspections.

He thought it was a bit of an overplay because the house was old and he was going to renovate it anyway.

In the end he erred on the side of caution and decided to get the reports completed.

A good thing too, because the inspections revealed not only a leaking pool, which would’ve cost $15,000 to get relined, but also a massive termite infestation!

Had he not had the reports done, just to rectify these two issues alone would have set him back $55,000.

As the report turned up a few more expensive building issues, I was able to leverage the purchase price down and saved my client a whopping $85,000 off the sale price.

So, the proof is in the pudding.

Do get the inspection reports done.

Yes, it’s time-consuming and tedious, but is will save you an absolute truckload of money in the long run, and if any problems are discovered, your buyer’s agent can use great purchase prices for you.

And, more importantly, getting the reports completed allows you peace of mind.

The Danger Signs

Common causes of serious value loss in properties include:

• Termite damage
• Structural issues and modifications
• Illegal and unapproved structures not built to required standards
• Soils settlement resulting in foundation issues.

THREE THINGS TO AVOID AT ALL COSTS

1. Original features removed.
2. Geometry problems – narrow rooms, bathrooms through kitchen.
3. ‘Sleepy hollow’ locations.

This article first appeared in Australian Property Investor Magazine – Australia’s #1 Magazine for property investors and is republished with their permission.